Tuesday, August 07, 2007

Negotiators Report Progress on Wind Power in Delaware

The parties in the negotiations to bring wind power to Delaware told the Public Service Commission (PSC) this afternoon that they are making progress and hope to have agreement on the terms by September 14. While the parties did not meet the PSC's original target of reaching agreement in sixty days, Hamermesh and representatives of the parties did report progress, and all agreed to the deadline of September 14.Mediator Lawrence Hamermesh presented the first detailed report on the negotiations since the PSC ordered the parties to the table in May. He reported that Delmarva Power and Bluewater Wind have resolved some issues, including the term of the proposed contract, the use of renewable energy credits and remedies in case of contract default, for instance if permits are not obtained. The biggest issues such as plant capacity and pricing have not yet been resolved.Delmarva Power (DPL) is simultaneously negotiating with NRG and Conectiv Energy for a natural gas backup facility near the wind farm. The negotiations are expected to produce term sheets — detailed descriptions of the proposed contracts — for presentation to the PSC by September 14. While Delmarva Power is negotiating with all three bidders, the substantive terms for the backup power plant will depend on the terms for the wind farm. The term sheets are expected to be as long as twenty pages each. Todd Whitman, speaking for DPL, emphasized the magnitude of the potential deal, which he said could total as much as $10 billion over 25 years. All of the parties spoke of the complexity of the negotiations, the operative metaphor being a Rubik's Cube (a metaphor reported here last month). DPL is negotiating with Bluewater Wind, and with two companies to provide backup power. Bluewater Wind already has a long term agreement with the Delaware Municipal Energy Corporation (DEMEC). The terms of these agreements must comport with rules for producing and moving electricity set forth by PJM Interconnection, which manages the regional power grid. The federal review of the wind farm site itself is somewhat fluid, since the Mineral Management Service, which oversees the leasing of offshore oil and gas fields, has never actually been presented with a proposed offshore wind farm. Other federal agencies will have to review the proposal as well.Assuming the parties agree, three separate term sheets will be presented to the PSC on September 14 for staff review. The PSC would then review the staff report by October 29. Public comment would be accepted up to November 12, and the PSC and other agencies involved in the RFP would consider the proposed terms, including which of the two backup proposals to accept, on November 20. In the meanwhile, the parties will have been working on turning the terms sheets into complete Power Purchase Agreements (PPAs), which could run as many as 200 pages.What of the threats of legal action by Delmarva Power and Conectiv Energy (both part of Pepco Holdings)? The PSC adopted Order No. 7246 which denied Conectiv's appeal of the PSC's May decision in no uncertain terms. Conectiv argued that it should be allowed to submit its own wind power proposal. As for DPL's appeal to Superior Court, that has been set aside for the time being, pending the outcome of the negotiations. It doesn't require high levels of paranoia to imagine that DPL and Conectiv have their legal staffs working on further legal actions if the negotiations fizzle.This is more progress than I expected. To have all parties agree on a deadline is encouraging. But the most significant issues have yet to be resolved. PSC chair Arnetta McRae several times alluded to the intense public interest in the outcome of this process. Just as this public attention affected the decision to opt for wind power, it can only help to keep the process on track. Stay tuned.